By Tim Bradley, managing director, Pecaso UK
The idea that people are an organisation’s primary resource is hardly a new thought, so why is HR so often pushed to the bottom of the corporate agenda? Dwindling budgets and the focus on revenue-generating business, mean that companies look to cut back cost centre budgets. This can mean that funds for HR and marketing often come under scrutiny. HR is at the heart of what makes an organisation tick and scrimping on investment in this area is often to the detriment of the business.
The reason that HR has been a difficult area in which to encourage investment is twofold. Firstly, inefficient use of technology is a problem that has dogged many an HR department. Disparate systems are often employed to govern procedures from payroll to recruitment. In the past, few companies had systems that pulled together all the strands of the HR function. This can be really costly, as inefficiency abounds and results in missed opportunities, duplication and errors. For example, if a staff member is promoted and put into a different pay bracket, this has to be updated across all systems, instead of just updating the one.
If your appraisal system is not linked with your recruitment or succession systems, how will you know that John from procurement would like to move into marketing? When a suitable opportunity comes up in marketing, he would probably get overlooked. This could cost your organisation the employee (who may look elsewhere for a marketing job) and the expenditure of having to recruit another person. It’s long been known that integration of systems, processes and sometimes, even departments, can really hone HR expenditure and result in more streamlined practice. But the second hurdle that HR managers hit when it comes to justify budget is more problematic.
Most areas of HR are considered intangible when it comes to cost. It’s difficult to put a price on appraisals or recruitment if they are done internally. Obviously, this can make explaining expenditure difficult for an HR director or manager trying to present their business case to the board. With process efficiency and return on investment becoming increasingly core objectives for most companies, many HR departments struggle to find a method to do this effectively. A definitive way to put a price on HR functions is something that eluded organisations for years, but the drive to create an HR environment that could be seen to operate in a cost-efficient manner and utilise resources to their maximum capacity, prompted HR specialists to create processes that could do this in an effective way.
There are now methods that can be used to calculate return on investment and weigh-up costs in the HR area: one of which is to use a business process efficiency tool. HR ROI systems like this use an organisations unique blueprint – its processes, costs, people, structure and technology – to identify the current value of HR processes; areas where HR value has the potential to be increased; where or how IT can improve operations and what financial returns can be delivered.
Measuring your current processes in this way provides a strong foundation for re-evaluating your processes and providing a benchmark for the project objectives. So if an organisation were considering an HR IT implementation project, an ROI tool can be used to produce a range of calculations to support the business case such as net present value through the payback period to return on investment in, say, five years’ time. Put simply, it enables HR managers to give proven ROI figures, specific to their organisation, to the board, making demonstrating value and cost saving easier than it has been in the past.
With increasing answerability to the taxpayer, the tangibility of HR is just as pertinent in the public sector as the commercial sector. Staffordshire County Council was one of the first organisations to map all of its HR processes onto an ROI tool. The project involved restructuring the HR department and moving it towards a shared service operation to serve its workforce of 32,000.
“For organisations that are undergoing significant process change, as is the case with many local government departments, these tools make a good platform for success,” says Jim Savege, head of strategic HR at the council. Staffordshire used the tool to run a quality check to ascertain how many people they needed to work in their personnel and payroll department. The tool’s analysis highlighted that they needed to reduce the number of people working in the department by 20 per cent (these people were redeployed within the organisation to meet other priorities) in order for it to operate at its maximum efficiency.
An ROI tool can map future processes and test assumptions on all sorts of things, from numbers of staff to costs. Staffordshire County Council’s Jim Savege explains the benefits of this: “It means we can look at the data dynamically to tell us whether we need to move people to do a particular job and as far as value for money goes, it means that we can keep a much better handle on costs, which is good not just for the bigger picture, but also good for the community.” This echoes the point that in the public sector, HR people are not only accountable to their board, but also to the taxpayer.
Taking a step back, analysing your current processes and looking at where improvements could be made using existing technology is key. It’s surprising how many organisations do not use the system they already have to its maximum potential. Streamlining HR procedures is the first step to maximising budget. And as HR professionals are becoming more accountable and having to demonstrate a sturdier business case, a tool that calculates HR return on investment and analyses current procedures and models could just fit the bill.
